Washington - The National Association of Manufacturers predicted yesterday that inflation will remain stable this year and next in the face of a sustained economic expansion.
The group's semiannual economic forecast came shortly after the Labor Department reported that wholesale prices fell 0.1% in April, helping to spur a rally in the bond market.
"While there has been "some pressure on prices" as factories have had to operate at higher rates of capacity, slack in labor markets, "low energy prices, and downward pressure on prices from global competitors will keep inflation under control," Jerry Jasinowski, the president of the group, said yesterday at a news conference.
The association predicted that retailers would raises prices only 2.7% this year and slightly more - 3.1% - next year. It also anticipates about 3% real growth in the economy through the end of 1995.
A survey that the association released yesterday along with its economic forecast showed that more than 80$ of the group's members expect manufacturing wages - which typically account for most of a company's costs, to raise at about the same rate this year as they did last year. Another 10% of those surveyed said they expect wage growth will actually slow.
The recent spike in long-term interest rates is an abbreviation; given the inflation outlook, said Gordon Richards, the group's chief economist. He predicted that long-term rates will decline by about 50 basis points from current by the end of next year.
The group estimated that economic growth would have been about a half point stronger had the Federal Reserve not begun raising short-term interest rates. Nonetheless, the group urge the Fed to raise rates another 50 basis points, bringing the federal funds are to 4,25%, and then stop.
"Let's get it over with," Jasinowski said. "We need to remove uncertainty from financial markets, so we don't damage the fundamentals of the economy."
Two-thirds of manufacturing executives responding to the survey said they expect the Fed's rate increases to slow growth modestly, but a majority of respondents anticipate relatively strong growth next year.
One reason is that the group predicted that U.S. exports will grow strongly next year as major trading partners of the U.S. recover. About half members surveyed indicated they expect their companies' exports to grow by 7% or more in 1995, and another third said they expected export growth of at least 5%.
Despite the general optimism, manufacturers remain very cautious, according to Robert Pritzker, chairman of the group.
The survey showed that manufacturers still are very reluctant to hire full-time permanent employees or build up to much inventory. The marginal costs of new employees is "enormous," Pritzker said.
"I tell people it's more economical to be pessimistic than optimistic," he said. "All expansions come to an end sometime, and so will this one."
